Daily ShareChat: Nuplex Industries

While the deteriorating global economic conditions reduced demand for resins company Nuplex Industries' products following destocking by customers, there is some evidence this trend is reversing, says McDouall Stuart.

That has provided the company with confidence to provide guidance of $86 million in earnings before interest, tax, depreciation and amortisation (EBITDA) for the current year, it says. That's down from $122 million in the year ended June 2008.

The broker is forecasting EBITDA of $86.2 million for the year ended June 30, rising to $95.1 million the following year.

The consolidation of the global resins industry "has led to rational behaviour and improving margins," it says. About 81% of Nuplex's earnings last year came from resins.

It says restructuring of Asia Pacific Specialities, which Nuplex bought in 2002, will see its operations transferred to other Nuplex resin production sites or sold or closed down which will release capital and improve the group's profitability.

"The underwritten cash issue should alleviate the financial risk of the company and allow management to pursue operational improvements in a difficult global economic environment," it says.

Nuplex raised $159.5 million in April from a rights issue and placement.

"The share price is likely to appreciate as management deliver on their earnings guidance," McDouall Stuart says.

BROKER CALL:  McDouall Stuart rate Nuplex Industries (NZX: NPX ) as buy.

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